Shark Tank's investors, and investors in general, usually ask many specific questions in order to obtain the answers needed. A handful are straightforward and a few are somewhat trickier, yet hopefuls would be smart to have good answers ready or customize their pitches in order to answer every one right off the bat. The following are eight questions every entrepreneur must consider prior to pitching:
What are your sales?
It's always question No. 1. Plus, just having knowledge of the dollar figure is not enough. Where are the sales coming from? Are sales driven by promotions? On what platform? Which kind of partners are you working with? Is your marketing working?
The figure better be good, as well. You cannot charm the sharks into loving a business that is not likely to earn any money.
More importantly, the sharks have a desire to know if sales are increasing and what your strategy is to keep it that way. It's important to have a story about how expanding into new geographies, online efforts, or new product lines have grown or can potentially increase sales. These investors are focused on profit, and the more an organization is able to scale, the better.
What are you going to bring to the table?
Shark Tank investors repeatedly say that an investment is not merely in a business or an idea, but in the entrepreneurs themselves.
This means you need the ability to spotlight a record of industry experience, success, or why you are dynamic enough to justify taking on a gamble. An excellent narrative about the company or a strong personal story, alongside solid presentation skills, will go a long way in answering this particular question.
Why do you have to have our money?
It may be the question that will trip up entrepreneurs the most. Usually, it isn't enough to seek money to merely expand the company and have the assistance of a skilled investor.
It's instead a lot more effective to understand exactly what you might do with the quantity of funds you are requesting, and how it might assist the company in growing and rapidly scaling. Whether it is hiring, marketing, or building out production, spell out exactly what your strategy for the money is.
Why a big valuation?
It is in a shark's interest to gain a large equity stake within a promising business for the least quantity of funds invested. Therefore, if you are requesting a massive valuation at a substantial revenue multiple, you had better have the ability to logically explain your justification and to do so in-depth.
Is the product unique?
If you are entering an already congested marketplace, you better have a great case for why your service or product can beat the competition.
Plus, if it is something new, is it able to be easily copied? If you have invented something that is truly unique and you do not have a patent, you have not done your research or protected your business model enough.
Knowing what will set your company apart, and how it may be protected against the competition, is certainly essential.
How much debt have you acquired?
If your company is funded by cash you must repay, an investor will want to know. They likely will be wary of assisting in making somebody's debt payments for them.
If there is a massive quantity of debt, have the ability to justify it, and understand the terms it has been borrowed under.
What is your quantity of inventory?
One sign of a well-run company is that you do not have a lot of product sitting around. Excessive inventory is dead weight, as it is money you have spent that you have earned no return on.
Having the ability to produce items in response to demand is an indication of having great information, an excellent sense of the marketplace, and an outstanding supply chain. A huge warehouse of product will make it appear as if no one wants it, even if that isn't the case.
What are your current costs?
An investor wants to gauge your capability for making great profit margins by keeping expenses low or having enough demand to keep costs high, or ideally both. You should be able to explain what it will cost to make each service or product, and the difference between that expense and the unit sales cost. You should also prepare to outline overhead expenses, like insurance, utility costs, and rent.